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IRS Issues Proposed Regulations Regarding MLP Qualifying Income

Client Updates

The IRS has released proposed regulations regarding what types of income derived from natural resources satisfy the section 7704(d)(1)(E) publicly traded partnership (PTP) qualifying income rules.

The proposed regulations provide guidance on section 7704(d)(1)(E) concerning qualifying income from the exploration, development, mining and production, processing, refining, transportation, and marketing of minerals and natural resources. The proposed regulations also address income earned from providing services to others in the oil and gas industry. They do not address other forms of qualifying income.

The proposed regulations are generally applicable to periods after they are issued in final form. The IRS has requested comments on the proposed regulations before they are finalized and become effective.

The IRS had announced a halt in March 2014 on letter ruling requests regarding whether a PTP’s income is qualifying income under section 7704. In March 2015, this pause was lifted and the IRS announced that it intended to release proposed regulations that provide guidance concerning qualifying income from the exploration, development, mining and production, processing, refining, transportation, and marketing of minerals and natural resources.

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